Market Summary

Yield Movements

Local currency government bond yields in the Republic of Korea fell for all tenors between 1 June and 30 August, driven by expected rate cuts from the Bank of Korea and the United States Federal Reserve. While the Bank of Korea left the base rate unchanged at its 11 July and 22 August meetings, the central bank indicated that the timing of a rate cut depends on the path of inflation and gross domestic product growth, as well as the impact of rising household debt on financial stability.

Local Currency Bond Market Size and Issuance

The Republic of Korea's local currency bonds outstanding grew at a faster pace of 2.7% quarter-on-quarter (q-o-q) in the second quarter of 2024 to KRW3,398.3 trillion as the stock of both government and corporate bonds increased during the quarter. The Republic of Korea's government bond market increased 2.7% q-o-q due to higher quarterly issuance of Treasury bonds. Meanwhile, corporate bonds outstanding grew 5.0% q-o-q because of the smaller volume of maturities, despite a contraction in issuance.

Sustainable Bond Market

The Republic of Korea had the second-largest sustainable bond market in emerging East Asia with outstanding bonds worth USD177.6 billion at the end of June on marginal contraction of 1.3% q-o-q. Social bonds comprised 50.8% of the sustainable bond market, of which the majority were issued by the government. Almost 70% of the sustainable bonds outstanding carried maturities of less than 3 years, resulting in an overall size-weighted average tenor of 3.1 years.